As we advance into 2009, it is apparent that we face the most serious financial challenges in recent decades. This financial downturn is global in nature and can’t help but have a negative effect on global trade. Every segment of our industry is or will be caught up in this business downturn.
The segment of our industry most seriously affected, in my opinion, is the ocean carrier. The ocean carrier industry by nature is highly capital-intensive — high capital, high risk! Capital investment must be planned years in advance based on accurate market forecasts. Unfortunately, past market forecasts indicated moderate to steady increases in volume over the coming decade. These forecasts never anticipated the type of global downturn we now face. Ocean carriers struggled during 2008 to cope with rising fuel costs. This year they must face shrinking volume at a time that a new wave of mega-ships is coming on stream. History has shown that too much capacity chasing too little freight causes unreasonable downward rate pressure.
This year, however, the situation is further aggravated by the well-documented actions of the European Union’s elimination of rate conferences that have been the most stabilizing influence in global trade.
The threat to the viability of global ocean carriers is substantial. Elimination of rate conferences in Europe attacks the very essence of carriers’ ability to communicate. How ocean carriers will react individually or as a group remains to be seen.